but he himself never had. Moreover, since the value of the securities in
question had risen far above the price of purchase, the firm had not robbed
the company. His hands were clean and his conscience clear: “I know I
have been a conscientious and good director of the Equitable Society, as
Kuhn, Loeb & Co. have had no dealings with it which were not entirely
legitimate.”^78
Although Schiff assured policyholders and others that the Equitable So-
ciety was solvent and safe, he called for stricter regulations over insurance
companies. Moreover, he wanted directors with the power to direct; other-
wise they “must not be held responsible for the selfish methods of the exec-
utive officers, of which we knew nothing until the investigation into the af-
fairs of the Society brought these methods to light.” The lesson to be
learned from the episode, he told a junior partner at Kuhn, Loeb, was to
handle corporations with special care.^79
The Equitable affair turned the public spotlight on life insurance com-
panies generally. In September the New York legislature began an investi-
gation of the big three—New York Life, Mutual Life, and Equitable. The
hearings of the Armstrong committee drew national attention, and the
counsel, Charles Evans Hughes, won public acclaim. The well-prepared
Hughes interrogated a parade of witnesses. Among those from the ranks
of the rich and the famous were George Perkins (a Morgan partner), E. H.
Harriman, and Jacob Schiff. Just because of Kuhn, Loeb’s long-standing
relationship with Equitable—from 1897 to 1902 alone, Equitable’s trans-
actions with the firm amounted to some $30 million—Schiff was a key
witness.^80
Hughes carefully questioned the banker on two central issues, the finan-
cial transactions of the Equitable Society and its relations with Schiff and
Kuhn, Loeb. Intent primarily on clearing his own name, Schiff bitterly de-
scribed what he called the society’s manipulative, irresponsible, and power-
driven executives. Management had made the board of directors and the fi-
nance committee, on which he also served, into mere figureheads, and
neither body was significant in the purchase or disposal of securities. The
finance committee, for example, never initiated but could only react to
transactions that the executive chose to report. It followed that he, Schiff,
neither advised purchases through Kuhn, Loeb nor was automatically ap-
prised of transactions that involved his firm. Denying that he ever heard
reports at meetings of the finance committee that proved the society’s ir-
regularities, he explained at one point that he had a hearing problem!
Again the banker stated that he had received legal advice on the rectitude
of serving as a director.
Hughes persisted. Without bullying Schiff or purposely antagonizing
him, he labored diligently to prove the banker’s full knowledge of
Equitable’s dealings, particularly with Kuhn, Loeb. Using different ways to
The Making of a Leader 27